The Cross-Border Series Part 3: Landing An E-Commerce Strategy In Latin America
In the third of his multi-part series on international search marketing, Bing's Gabriel Kwakyi discusses the Latin American market.
“Latin America” is a term that identifies the countries throughout the Northern, Central, Southern and Caribbean Americas where Romance languages are the primary tongue, which counts a combined population of about 600 million people. LatAm is also home to a regional economy of $6 trillion (World Bank figures for all countries) and an e-commerce industry that’s valued at $88.3 billion in 2015 and growing by 24.2% annually (eMarketer study).
When it comes to Latin America’s status among digital marketers, one major theme rings out: Latin American customers cannot be ignored by any business that is serious about international growth.
Part 3 of the cross-border series for search marketers provides several useful learnings to consider when establishing a Latin American strategy, from opportunities to challenges and beyond.
While Latin America encompasses more than 20 countries, one thing to know is that there is a sizable discrepancy between the two major leaders (Brazil and Mexico) and the rest of the pack.
According to eMarketer, Brazil and Mexico accounted for 36% and 20% of regional e-commerce sales, respectively. These regional titans are also poised to increase their dominance with continued infrastructure improvements, since both countries have large populations and economies but low internet penetration rates. Brazil is at 200 million people, a $2.25 trillion GDP and 54% internet penetration; Mexico is at 122 million people, a $1.26 trillion GDP and 44% internet penetration (per World Bank figures and an online database of internet penetration rates).
Argentina often takes third in marketing investments, given Argentina’s leading internet penetration rates, third-largest economy and fourth-largest population; however, be aware that doing business as a foreign company in Argentina is complicated due to governmental regulations. Colombia and Chile are also countries that rank in the top consideration set for marketers, given their regionally high internet penetration rates and economic activity.
Key Points To Keep In Mind When Marketing To Latin American Customers
Shopping Sprees. Digital marketers will be glad to know that Latin American consumers are highly engaged in shopping, spending a good portion of their disposable income on retail and e-commerce. Data from Worldpay’s 2012 Global Online Shopper Report supports the trend of Latin America’s shopping habits, with Brazilian shoppers spending 27% of their disposable income on shopping on the internet, and Mexicans and Argentines each shelling out 21%; for context, the study pegs the global average (and the United States) at 23%.
Additionally, some consumers are also used to paying more for products, with a pair of jeans in Brazil costing 35% more than they do in the US and a pair of Nike running shoes costing more than 24% over the US cost, per Numbeo statistics. While this does spell opportunity for e-commerce marketers who are ready to invest in a regional campaign, there are some challenges to consider before tapping into these shopping habits.
Mobile Is Massive. One of the most important facts to consider when developing a strategy is that Latin Americans overwhelmingly use mobile devices in their daily lives, and especially to connect to the internet. Maren Lau, CMO at Internet Media Services, commented on LatAm’s mobile trend in a 2015 eMarketer interview: “Latin America is a mobile-first region. As digital consumers grow, they’re starting to use mobile and may not even have a computer.”
One eMarketer study, “Mobile Rivals PCs for Brazil’s Internet Audience,” found that in 2013 there were 142.7 million mobile users in the country and predicted that by 2017, nearly all (98%) of Brazil’s internet users will do so from their mobile phones. Another eMarketer study on Mexican internet trends indicated that 81.4% of Mexican internet users will connect from their mobile phones in 2015. In order to succeed in Latin America, digital marketers must optimize for mobile apps, websites and conversion funnels.
Payment Puzzles Are Plenty. While many Latin American customers use credit and debit cards for purchases, most do not use international cards; according to Allpago, 69% of Brazilians use credit cards for online purchases, yet 70% came from internationally restrictive national cards. A large number of Latin Americans prefer instead to use alternative payment methods or cash, requiring businesses who want to sell to Latin American customers to partner with local payment processors or pay-on-delivery companies.
Popular alternative payment methods include Boleto Bancário in Brazil, PayPal and cash on delivery in Mexico, and other payment vendors such as DineroMail and Astropay.
An additional payment-related consideration highlighted in the Worldpay study is that Latin American customers consistently indicated that fears of fraud and identity theft were chief concerns, making alleviating customer concerns of safety while shopping online an important task for businesses.
Per the same Worldpay study, customers were also concerned with finding a good deal and not being surprised by additional charges or taxes. A summary of the Worldpay study is available from the company’s CEO, Shane Happach, on the Huffington Post’s blog.
Other Operational Obstacles. While Latin American countries are growing in terms of importance, doing business in Latin America is still a difficult task. Businesses looking to expand to Latin America face high import taxes and currency exchanges that make American goods more expensive, as well as an underdeveloped shipping infrastructure that makes delivering products a big logistical challenge. Additionally, with the exception of Argentina, Latin American countries have very low English language skills, requiring Portuguese and Spanish translation support for websites, keywords and ads.
Speaking of language, marketers would do well to study the differences in geographic dialect across languages, such as spelling of the word “ticket.” Latam at Microsoft’s Mariano Medina Walker provides additional context:
As Oscar Wilde once said in reference to England and America, in Spanish Latin America we are also “separated by a common language.” For example, for “airline ticket” you say “boleto” in Mexico, “tiquete” in Colombia, and “pasaje” in Argentina. Taking this into consideration will help your Ad look familiar to the Latin American consumer.
Differences in dialect can also be found within the same country, explains Karinne Lima, Bing ads account coordinator at Microsoft:
While certain Brazilian states would look for “sapatos,” others would most likely search for “calçados” instead. Another example is the debate between “bolacha” in São Paulo versus “biscoito” in Rio.
So Who’s Winning?
Many companies have set their sights on Latin American customers. Amazon is a prime example, having called Mexico “its biggest international launch ever” after launching a Mexican online storefront.
There’s Rocket Internet’s new fashion startup, Vaniday, which is seeking success in Brazil. Why? Probably because Brazil is, according to McKinsey, “the third-largest beauty and personal-care market in the world, after Japan and the US.”
Alibaba’s Aliexpress.com sub-brand has also established a weighty presence in Brazil, per an Internet Retailer report, becoming the country’s third-largest e-commerce website, with 110 million monthly visitors. The report also illuminates how Aliexpress has adapted to overcome regional obstacles by partnering with Correios (the official Brazilian postal service) and local payment processors.
Opportunities in the region also include consumers within the Caribbean countries: For example, a recent Fast Company article highlights how Airbnb sprang into action to capitalize and drive more booking volume in the wake of improving relations between the US and Cuba.
While Latin America does present challenges for businesses looking to set up shop, the fact is that the region can no longer be ignored by marketers who are serious about international growth. With continuing improvements to governmental regulations, infrastructure, financial access, mobile adoption, internet penetration, and even education, the region holds a positive outlook.
Additionally, where there are challenges, there are bound to be solutions. Near Shore Americas and Pulso Social cite Axado and Loggi, two startups that have risen to the challenge of helping companies overcome challenges in delivery and logistics.
A final point for marketers to consider is that Latin America is one of the largest external influences on the United States, meaning that understanding Latin American customers should be a top priority for American businesses that wish to stay relevant in their own backyard.
For supporting detail, consider Mexico’s official immigration numbers, which top the list with near double the next highest country (135,028, compared to China’s 71,798). Consider also that, per a 2011 Pew Research study, 38 million people in the US speak Spanish as the primary language at home, more than 1,300% the next highest language of Chinese, tallied at 2.8 million.
Indeed, many marketers have already reacted to this trend of growing Latin American influence on the United States. A 2015 press release by the Association of Hispanic Advertising Agencies revealed that the top 500 US advertisers boosted their Hispanic ad investment from $4.3 billion/5.5% total ad spend in 2010 to $7.1 billion/8.4% total ad spend in 2014 (+63% absolute dollar growth and +57% of ad spend relative total spend).
An Advanced Bing Ads Intelligence Tactic: Estimated Ads Per Search
When setting up Latin America search campaigns, be sure to review these items:
- Optimize for your mobile app, website and conversion funnel.
- Localize and translate for the market you’re entering (e.g., translate into Portuguese for Brazil and Spanish for other countries, use the appropriate currency, optimize prices by market, etc.).
- Perform in-market keyword research.
- Break out your campaigns by country for better control and reporting.
To take keyword research a step further, you can use the Bing Ads Intelligence tool for Microsoft Excel to calculate an estimated ads per search metric when setting up a campaign in any new market. What this estimation metric uncovers is where demand (searches) is highest and competition (impressions) is lowest; you can find these data points by using the traffic and exact match, keyword performance report in the Bing Ads Intelligence tool. Competing with fewer ads for a click can both improve your click-through rate (CTR) and reduce your effective cost per click (CPC), which means you can acquire more customers at a lower effective cost per acquisition.
Going a level deeper, you can combine this competitive metric with market CPC, impression and CTR data and also add your own data, such as profit margins, to zero in on your highest potential products, forecast budget, and predict ROAS, all without spending a dime. Here is an example of a calculated ads per search (APS) analysis for the month of June for all device types. We can draw a few conclusions from this particular report.
- For the majority of Latin American countries here, searches for the English keyword “shoes” have a lower APS than the native language variant. In fact, Mexico doesn’t seem to have any ads, and in Brazil, searches for “shoes” have a 40% lower APS.
- Brazil, as expected, has the highest APS; however, Mexico has an APS near 1 and comparatively very strong demand.
- On average, fewer than one in three Argentine searches for “zapatos” currently show ads.
Assuming the conversion rates are similar, these are some profitable discoveries!
Stay tuned for the fourth and last installment of the cross-border series, which will cover the Asia-Pacific (APAC) region; as always, please feel free to share and comment if you have additional context, tips or lessons learned for marketing to Latin American customers.
Thanks for reading, boa otimização and feliz optimización!
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